Just in the last week, the cities of Laguna Niguel, Mission Viejo, San Juan Capistrano and Irvine have passed resolutions declaring their support for Proposition 13.
Proposition 13 has recently come under attack by a group of far-left activists based in San Francisco. They want to blow the state’s landmark taxpayer protection to pieces so that they can raise your taxes through the roof and drive more jobs away.
They are going from town to town peddling the abolition of Proposition 13 and trying to establish alliances with politicians who also want to raise your taxes.
Now, ethical leaders are speaking out and announcing their communities stand behind Proposition 13. Taxpayers’ good friend Laguna Niguel Councilman Robert Ming introduced the resolution in his community.
We also thank citizen taxpayer advocate Steve Magdziak for reaching out to Orange County elected officials and grassroots organizations urging the passage of local resolutions in support of Proposition 13.
Add your city to the list of those that stand with Proposition 13! You can pass a resolution in support of Proposition 13 in your own community by proposing adoption of the language we have posted on our web site. To sign the petition, visit www.hjta.org/declare-your-freedom-tax-tyranny.
Thank you for your support of Proposition 13 and the work of your Howard Jarvis Taxpayers Association.
Keeping It Real About Tax Subsidies
Just a short while ago, this column criticized Sacramento for subsidizing those politically connected companies that are part of the “in” crowd with millions in tax credits while maintaining high taxes on less glamorous industries. Auto maker Tesla has recently been “gifted” $35 million in this fashion and both Democratic and Republican lawmakers are lining up to ingratiate themselves with movie moguls while bearing offerings of hundreds of millions in tax subsidies.
Now we have a new high profile recipient of state largess. The Legislature has passed a bill by Democrat Al Muratsuchi to give space firms a property tax break. One of the principal beneficiaries would be billionaire Elon Musk’s company, Space X, that builds rockets and spacecraft in California. That the bill would give his and other firms an exemption from property tax bills on launch vehicles, fuel and satellites, seems ironic in that many in Muratsuchi’ s own party argue that businesses are not paying their fair share in property taxes. Looks like we can now add space firms to the card-carrying members of the Sacramento“in” crowd.
It is ironic that while the politicians scramble to entice favored business to remain in California, more ordinary companies like Toyota, which has just announced that it is moving its North American headquarters along with 3,000 jobs to Texas, are leaving with not so much as an “Hasta la vista, baby.” Toyota obviously lacks the cachet of Tesla and, from Sacramento’s perspective, the workers that will lose their jobs will hardly be noticed when added to the nearly two million Californians that are already out of work.
But it is not just large firms like Toyota that are disenchanted with California. The suffering of small businesses continues to be beneath the consideration of the Sacramento political class. A newly released report by the Small Business & Entrepreneurship Council confirms what numerous other studies and reports have indicated, that California’s small-business tax environment is the worst in the nation.
Human nature being what it is, it may be understandable that, given a choice, the political class would rather rub elbows with the manufacturers of exotic sports cars, space craft and the producers of hit movies and television programs, than they would with the owners of barbershops or bakeries. And it is not surprising that they justify their favoritism with arguments that the industries getting the subsidies will return benefits to the state that outweigh the cost to other taxpayers.
But here is the rub. Their self-serving, economic arguments have no connection to reality. A just-released report from the non-partisan Legislative Analyst’s Office says that the state’s subsidies to the Hollywood producers may not stem job losses to other states. And for every $1 of subsidy, the state gets back only about 65 cents.
Legislative Analyst Mac Taylor adds that other states can just increase their own movie industry subsidies, while cautioning, “This sort of competition can be characterized as a race to the bottom.”
The “race to the bottom” of course is not the only problem with such narrowly focused tax favors. For every new tax deal struck, other industries and interests will notice and, pretty soon, they will be hiring their own army of suits to lobby for their specific corporation or interest. The danger here for corruption is self evident. At a time when three California senators have been convicted or indicted for wrong-doing, maybe the Legislature should say no to a system which will, like fresh donuts in the break room, offer temptations hard to resist.
As the expression goes, let’s keep it real. It’s time for California to lower the tax burden on everyone, not just the favored few. Not only is that better tax policy, but it might also help to keep our elected officials on the straight and narrow. Lord knows they could use the help.
Rumsfeld’s Problem is Our Problem
In filing his tax returns, Donald Rumsfeld included a letter to the IRS stating, “As in prior years, it is important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate.” Now critics of the former secretary of defense and member of Congress may not be sympathetic, but they overlook the fact that Rumsfeld’s problem is shared by almost every American taxpayer.
The U.S. Tax Code is currently 73,954 pages long and a few more pages are probably being added as this is written. Every year, members of the Washington, D.C. political class pay lip service to the goal of tax reform, but usually all Congress does is tinker around the edges in an effort to please special interest supporters and to increase revenue, or “raise taxes” in the language of average Americans who end up with the bill.
This seems a good time to renew discussion of several proposals to actually simplify the tax system that have shown popular support over the last several decades.
The idea of a flat tax would be to establish a uniform tax rate for all filers with no deductions except, perhaps, for mortgage interest and charitable contributions. Under this system, it would be clear to filers exactly what they owe. An additional benefit would be that it would remove distortions to the economy. The current system creates an incentive for taxpayers to put their money in tax shelters. With a flat tax, taxpayers would put their money where it would earn the greatest return.
Critics of the flat tax worry that it would be unfair if rich and poor paid the same rate. However, this problem could be substantially alleviated by providing for a large personal deduction of, say, $50,000. It would be hard to argue that low income families and individuals would be unfairly treated if the income tax didn’t even kick in until the first dollar over $50,000.
The flat tax has been supported by the Hoover Institution’s Alvin Rabushka, former member of the President’s Council of Economic Advisors Arthur Laffer, and Nobel Laureate Milton Freedman. Even Jerry Brown supported this concept in his last run for the presidency. Brown went so far as to say that once the flat rate had been established, it should only be changed by a national referendum.
Another proposal that has gained traction with the popular imagination is a national sales or consumption tax that would entirely replace the income tax. Individuals would no longer have to deal with the IRS, they would pay their taxes when spending money. Many supporters are attracted to a system they believe would put the IRS out of business.
However, several important issues would have to be resolved. Would the tax also apply to services? And would it open the door to a European style value added tax, where each level of production and distribution adds an additional tax to the point where the consumer no longer has any idea how much they are paying for a product and how much of the total price is going to the government?
There are those who point out that the IRS, rather than being abolished, would continue to exist to ensure that businesses of all sizes are collecting and sending Washington the national sales tax. Critics also express concern that Congress could easily ratchet up taxes through a series of small increases over time that would result in a serious increase in the national tax burden.
There would, of course, be opposition to any simplified system and it would include those who make a good living professionally preparing tax returns. It has been estimated that Americans spend nearly $30 billion dollars annually on tax preparation. And it seems likely the only way the Washington D.C. politicians would support a simplified tax system would be if the filing form had just two instructions. The first, “Enter how much you made last year in the following box,” followed by, “Send it in.”
Any changes to our national (and state) tax system, not motivated by the avarice of the political class, that make it easier to understand and comply with would be welcomed by most taxpayers. As Rumsfeld, who is 81, told the IRS, he hopes that at some point during his lifetime, “the U.S. government will simplify the U.S. tax code so that those citizens who sincerely want to pay what they should, are able to do it right, and know that they have done it right.” Even for younger taxpayers, it might be more realistic to hope that this happens in the lifetime of our great grandchildren.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.